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What Does General Liability Insurance Cover?

General liability insurance coverage

As an entrepreneur, you know how many challenges a business owner faces every day. You can make a million correct decisions, but just one mistake could put your small business in jeopardy — even if that mistake isn't your fault. And general liability insurance coverage can be the best way to protect your company from a host of pricey claims.

What do we mean by pricey? According to Insurance Journal, some of the most common legal claims against a business cost upwards of $35,000 on average. Note that these figures were based on 2015 data, so it could be even more now:

● Reputational harm: $50,000
● Vehicle accidents: $45,000
● Product liability: $35,000

Think of general liability insurance as a safety net offering confident protection from crippling financial losses and legal expenses due to bodily injury or property damage. This article will explain what general liability insurance is, what it covers (and doesn't cover), and how much coverage your business could need. Plus, more FAQs are answered at the end of the article.

What is General Liability Insurance Coverage?

General liability insurance (GL) is a type of business insurance that safeguards your company from financial losses due to third-party claims for bodily injury (not related to a medical malpractice claim), property damage, or personal or advertising injury.

For example, say a customer comes to your business, trips over the rug, and breaks his leg. Your general liability insurance policy would typically cover his medical expenses. Or, while moving furniture at a client’s home, you accidentally damage a valuable painting. Your general liability policy would typically cover the cost of the replacement.

What Does General Liability Insurance Cover?

General liability insurance typically covers a host of events a business owner might be financially responsible for if they happen to a third party (like a customer). We’ll explain and give examples of each of these more in depth, but overall, the liabilities include bodily injuries (not related to medical malpractice incidents), property damage, reputational injuries, and advertising injuries. In addition, general liability insurance can also cover legal fees, medical expenses, and settlements or judgments resulting from covered claims.

GL is crucial for businesses of all sizes and industries, as it helps shield them from potential financial ruin. Here’s a breakdown of what is typically included in general liability insurance coverage.

Bodily injury coverage

GL can assist in covering medical costs resulting from bodily injuries caused by some aspect of your business, such as a customer slipping and falling inside your store or office. In fact, general liability insurance is sometimes called “slip and fall Insurance.”

Property damage coverage

If it’s determined, for example, that your employee inadvertently damages a client's floor during work at their residence, general liability insurance can help address the costs for repairing or replacing the damaged floor. This can be especially helpful for businesses that travel to clients' houses and offices, like painters, contractors, technology consultants, interior designers, and home organizers.

Reputational injury coverage

General liability can pay for your defense costs if your business is sued for personal injury that isn’t physical, including libel or slander. For instance, if you run a restaurant and a seafood supplier is wrongly accused of delivering contaminated food, resulting in loss of trust and customers, that could result in reputational injury.

Advertising injury coverage

GL can help cover the costs if a customer sues your company for false advertising, or a rival brand sues for slander. For example, suppose your accountancy business runs an ad during tax season promising to “get taxes finished within 48-hours or your money back.” But due to a staffing shortage, you miss numerous deadlines and may owe customers a lot of money.

What Does General Liability Insurance Not Cover?

While general liability insurance covers many potential legal claims, it doesn't cover everything. Consider GL as insurance that protects you from external injury and damage. For example, general liability insurance typically doesn't cover damages to your property or your employees, professional errors or negligence, automobile accidents, or business disputes. Most of these are covered by other kinds of insurance policies, depending on the type of claim. We explain more below.

Damages to your property

Protection for your owned or rented business property, including real estate, requires commercial property insurance. This means that damage from events like fire and floods are not covered in your GL policy. However, damage to someone else’s property may be covered by your GL policy.

Employee injuries

Workers' compensation insurance covers employees in their recovery from job-related injuries or illnesses. It may cover medical expenses and ongoing care costs, ensuring that workers receive necessary support and care following workplace incidents.

Commercial automobile accidents

If you or your employees drive a company car or van, you’ll need a commercial auto insurance policy. This can help cover you and your employees for damage caused during work-related auto accidents. Just note that your state may require specific types of coverage and minimum policies, like liability coverage for bodily injuries or property damage.

Professional errors or negligence

Professionals like healthcare workers, consultants, financial planners, graphic designers, and technology experts or web developers carry professional liability insurance to protect against their mistakes and/or business errors and omissions. Examples include, a healthcare professional who miscalculates a medication dosage or a bookkeeper who mixes up some financial figures. If these mistakes result in damages to someone or losses to a company, professional liability insurance helps cover costs related to those claims.

How Much General Liability Insurance Coverage Do You Need?

The amount of general liability insurance coverage you need will depend on your business needs. According to Insurance Business, general liability insurance for small businesses costs from $40 to $55 per month on average. The cost (whether paid monthly or annually), called a premium, can vary based on a few key factors:

  1. Your industry
  2. The scale and size of your business (revenue and locations)
  3. Your policy's coverage limits
  4. Your claims history
  5. Your business location
  6. The amount of your policy deductible

Most insurers work from a classification system developed by Insurance Services Office, Inc. (ISO) to calculate monthly premiums. And while similar businesses can have the same classification, their premiums could look a lot different. For example, a hair salon that sells high end products and a barber shop that doesn’t sell products are both places that cut hair, but they'll require different amounts of coverage.

Another way to save on your insurance premium would be to buy directly from the insurance company, rather than through an outside agency or brokerage. Your general liability insurance cost can be reduced by at least 15% if you buy direct.

How general liability policy limits work

Your general liability policy may allow you to choose your limits of liability. Limits are the amount of coverage you are granted per claim and per year. You might see the options of $1M/$3M, which would mean you’d have up to $1 million for each claim, and $3 million for all claims in the same year.

As an example, if your policy has a $1 million limit per claim and a $3 million general aggregate limit, and the insurance pays $800,000 for a claim, you would still have $2.2 million remaining for any other claims that year. If you choose to renew your policy, your limits return to $1 million per claim and $3 million general aggregate.

Protect Your Small Business With General Liability Insurance Coverage From Berxi

While GL doesn't cover every legal claim against your company, when combined with professional liability insurance, it could provide comprehensive coverage for your business and peace of mind for the unexpected.

Shopping around for the plan that best suits your business is always a smart idea but buying direct from Berxi can save you up to 15% on your general liability insurance plan. Berxi is part of Berkshire Hathaway Specialty Insurance Company (BHSIC). A policy from Berxi also comes with the knowledge that you're supported by that has the highest possible financial strength rating of A++ from AM Best and AA+ from Standard & Poor's.

General Liability Insurance Coverage FAQs

These questions commonly arise in discussions of general liability insurance. Be sure to read through your policy and talk to a product specialist to make sure you have the right kind of insurance for your business needs.

What types of claims are not covered under general liability insurance?

General liability insurance provides coverage for bodily injuries (not related to medical malpractice), property damage, reputational harm, and advertising injuries. It doesn't typically cover damages to your own property, professional errors or negligence, employee injuries, automobile accidents, or business disputes.

Is general liability insurance coverage worth it?

Yes, general liability insurance coverage is worth it if you run a business. It takes only one lawsuit to bankrupt your company and wipe out all the hard work you’ve put into your business; As a small business owner or contractor, GL is an essential tool to protect your company and personal savings.

Does general liability insurance cover theft?

General liability insurance coverage doesn’t cover theft, though other types of insurance, like commercial property insurance, can protect you in some cases.

Does general liability insurance cover all my risks?

No, general liability insurance coverage doesn’t cover all your risks. Your business may need to combine a general liability insurance policy with, including but not limited to, professional liability insurance, commercial property insurance, cyber coverage, and/or workers' compensation to cover more of your risks.

How do I buy general liability insurance coverage?

You can buy general liability insurance direct from Berxi. You can shop around for GL policies, but buying direct from Berxi can save you up to 15% on your plan, and it comes with other perks, too.

Last updated on Jun 04, 2024.

Originally published on Jun 04, 2024.

The views expressed in this article are those of the author and do not necessarily reflect those of Berxi™ or Berkshire Hathaway Specialty Insurance Company. This article (subject to change without notice) is for informational purposes only, and does not constitute professional advice.

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